A&M Keeps on Chuggin?

Increasingly frequent blasts of railroad-crossing alarms mean success for Arkansas & Missouri Railroad Co., and the silence between train whistles in Northwest Arkansas is shortening.

This year, A&M’s annual railcar traffic is expected to reach 50,000, up 16 percent from about 43,000 cars in 2001 and 127 percent from about 22,000 in 2000, said Larry Bouchet, president of A&M.

The short line railroad is growing so steadily that it likely will be upgraded to a class two line in 3-5 years, said Mark Bonnell, A&M’s vice president of marketing and systems administrator.

Class two companies generate operating revenue of $25 million-$35 million, and Bonnell said A&M is currently a class three, or short line, with operating revenue of less than $25 million.

A&M lines include 139 miles of track trailing from Monett, Mo., to Fort Smith.

The success comes after 14 months of freedom. In March 2001, A&M paid off a 30-year contract to buy 140 miles of track from Burlington Northern Santa Fe Corp. of Fort Worth, Texas. A&M fulfilled the contract in half the time allotted. Since then, Bouchet has managed an independent railway and now cooperates with most national railroads.

The leasing contract with BNSF restricted A&M’s decision-making abilities. Now that A&M owns the track out right, Bouchet is ready to do some reorganizing.

At press time for this issue of the Northwest Arkansas Business Journal, Bouchet planed to propose to A&M’s board of directors a merger with Allied Enterprises of Springdale.

Allied owns 800-900 railcars, 25 of which are diesel-electric locomotives. Allied also directs a scrapping service and operates A&M’s main transloader, American Best Transportation.

Bouchet, who serves as chairman of the board for American Best Transportation, said the merger would ease bookkeeping for the closely intertwined companies.

The A&M president intended to propose the acquisition formally May 10 at the A&M annual stockholders meeting in Fayetteville. Before the meeting, Bouchet said he was 75 percent sure the shareholders would approve the plan.

Bouchet said there are several other projects in the works for A&M:

• In 2-3 years, the company plans to upgrade a 40-mile stretch of track between Winslow and Fort Smith.

• Company executives want to build new lines to attract commercial customers to the rail. Negotiations are under way to lay track for two local poultry companies now. Bouchet declined to name them.

• Bouchet met with Fayetteville administrators in late April to discuss the possibility of laying seven miles of track to connect the city’s industrial park to the main rail line. Manufacturers such as Hanna’s Candles and Superior Tire Co. could load goods directly on the train.

• A&M officials also are considering entering an agreement with class-one Kansas City Southern to carry freight and passengers from Fort Smith to Poteau, Okla.

A Slower Solution

Strong manufacturers and a population surge have allowed A&M to develop in Northwest Arkansas, Bonnell said. Poultry, sand, paper, lumber and plastic are the commodities most often carried by local rail.

Fort Smith and Northwest Arkansas each produce comparable freight loads, he said, but Washington and Benton counties have fewer individual clients than Sebastian County.

Advanced Environmental Recycling Technologies Inc. in Springdale is one A&M client. The company, which trades on the New York Stock Exchange as “AERTA” and manufactures composite wood products, used the rail to ship more than 300 railcars of raw supplies and finished goods last year.

The future of A&M depends on intermodal coordination, Bouchet and Bonnell agreed.

Intermodal transport includes any shipment that uses more than one mode of passage for delivery. To organize the logistics of intermodal delivery, trucks, barges, railroads and planes use transloaders — warehousing stations where freight is dropped off by one mode and stored until it is retrieved by another.

Companies without spur access to railroads can truck goods to a transloading station for transfer to rail.

When shipping goods farther than 500 miles, Bonnell said, companies save 25-30 percent on freight costs by using rail. But shipping by rail is slow, and railroad dependents need some expendable time.

“Rail is economical, but we’re not a ‘just in time’ service,” Bonnell said. Freight takes 7-10 days to reach the West Coast from Arkansas.

Some companies use freight containers on trains and in transloading stations as moving warehouses, Bonnell said. They don’t pay a storage fee, and A&M’s logistics department keeps electronic tabs on each product by scanning a code printed on each railcar. The mobile goods often are protected in weather- and theft-resistant steel containers.

“People look at the railroad as old-fashioned,” Bonnell said, “but it’s very high tech … The rail and truck [industries] work closer now than they ever have.”

‘Misfits From Myself Down’

Driven by a strong vision of the connection between community and industry, Bouchet looks at the development of the railroad through the eyes of each of his 65 employees.

“I always said once I got into a position of power, I was going to run the company the way I wanted to,” Bouchet said.

“That means not only sending a handwritten birthday card to every employee, but also sending cards stuffed with $5 to their kids on their birthdays.”

Although A&M’s golden goose is freight, the railroad’s Springdale-to-Van Buren excursion train transported 18,000 tourists on 70 round trips last year.

The passenger train makes about $150,000 each year, Bouchet said, but “if we didn’t run all the freebies, we could make a lot of money.”

However, each dollar spent on the excursion train ride turns over several times in small communities, such as Van Buren, which hosts the tourists during their ride intermissions.

Also, various school programs and nonprofit organizations often use the trains as rewards, and no-charge rides are part of A&M’s community service plan.

“If the community doesn’t survive,” Bouchet said, “I’m out of business.”

The company leader said he uses his grassroots philosophy in his daily interactions, too.

When employees have problems that get in the way of their concentration at work, Bouchet said, such as divorce, health problems or troubled children, it is his job as president to try and help solve that trouble.

Taking the concept further, Bouchet tries to hire long-shot successes. For instance, if a person just out of a drug rehabilitation program needs a job, Bouchet said he has a position ready.

“We’re all misfits — from myself down,” he said. Although he admitted that the policy doesn’t always succeed.

“More than 50 percent of the time, they’ll hurt you,” Bouchet said. He added that he gives people a chance to make the best of themselves.

One employee “ripped off” A&M for $80,000, Bouchet said, but minimal turnover in the private, labor-intensive company is a testament to the honor system A&M uses. Employees don’t punch a time clock, and most are responsible for setting part of their schedules.

“Most people fail because they don’t have anyone to tell them they can do better,” Bouchet said, and added that most of his managers never thought they would work a high position.

“We’re a family,” he said.